One trustee, multiple funds

Managing conflicts of interest, setting rules for investment executives and thinking about what people want are part of Dick Morath’s fiduciary duty. Morath, a former chief executive of MLC’s retail and corporate fund businesses, influences how billions of dollars of Australians’ money is invested. He is a trustee of MLC Nominees, the board governing two MLC superannuation businesses, and PFS Nominees, which oversees Plum Financial Services, a master trust managing about $14 billion in corporate superannuation benefits. He is also chair of the administration business behind Plum and oversees MLC’s financial planning units.

MLC manages $48.6 billion in superannuation savings. Giving two boards control over the investments in MLC Wrap, the MLC MasterKey platform and Plum is convenient. It also creates conflicting interests.

“There are logical efficiencies and strengths but sometimes we have to think about related-party decisions,” Morath says, reflecting on his role in helping to govern the National Australia Bank-owned businesses.

When MLC Nominees decided to close one fund and shift its assets to another, the eight-member trustee board split so that half of the directors spoke for the closing fund and half represented the recipient. These so-called successor-fund transfers must benefit members and happen only if members of both funds have equal rights and representation. Both sides of the split board bargained in the interests of their members, Morath says.

“This is fiduciary duty. Half were responsible for the transferring trustee; half were responsible for the receiving trustee. There are always solutions to conflicts of interest.”

MLC Wrap hosts more than 300 managed funds. Individuals can only invest in these funds through a financial adviser. MLC’s investment-manager research team and a sub-committee of MLC Nominees, using ratings from researcher Lonsec, choose funds for the Wrap and MLC MasterKey, which sells multi-manager funds, and for Plum.

MLC runs “three funds with three different approaches because members in these funds are different,” Morath says. The company encourages members to seek financial advice and improve their financial literacy rather than rely on default investment products.

“Our duty is to make sure that members are educated. We want to give them a range of options. We don’t want to be paternalistic and say: this is what’s right for you,” Morath says. “We have to engage members in a way so they ideally make the decision and understand why they are making it.”

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